I hope you have a happy, healthy, and prosperous New Year! I believe you'll find the following link interesting; it looks at the events that shaped 2011and thoughts on what's ahead for 2012.

2011 Review/2012 Outlook

We look forward to seeing you next year!

The Cryden Team - David & Kymm

The holidays are a special time of year. From our family to yours, we wish you a very happy holiday season.

The Cryden Team - David & Kymm

What should you pay for mutual fund management? Is any fee acceptable? Well, theoretically, you'd pay almost any price for astronomical results. Since we all know that's just not going to happen on a regular or guaranteed basis, fees should matter in your overall decision making process.

Annual operating expenses (the fees charged by mutual fund money managers) are the most important fees you'll pay long term. In my opinion, it is not the most important thing you look at when choosing a fund; that should always be the fund's investment management itself. I have always felt that you are getting a fair deal if you are paying roughly one-percent per year in annual operating expenses or less; this is not, by any means, the average annual operating cost of most mutual funds today.

The average annual cost of operating expenses in the mutual fund industry is generally between one and two percent. Given that common stocks have averaged approximately ten percent per year, it's important to recognize that paying between one and two percent annually can really cut into your fund's performance long term. (All of my clients know that I use The American Funds Group so much because we get terrific money management along with low annual operating expenses. The combination of the two can be a powerful thing.)

Keep in mind that high annual operating expenses can truly eat away at your overall returns. In the long term they truly do add up.

Happy holidays to you all!

Every year at this time, I make a list of things to do before the end of December to better my upcoming tax return. Most of this list pertains to tax planning; you may want to review it to see what would help you and your tax and financial planning.

Here's a short list of things you might consider doing:

1. If you think you may need to deduct more in 2011 than 2012, pay your entire property tax bill before the end of the year, not just the first installment.

2. If you've reached your 2011 medical deductible, try to have any medical treatments or services done before the year end, including refilling prescriptions. (As you know, you start with new deductibles at the first of the year).

3. Pay any remaining California income taxes due for 2011. (For most people, California income taxes are deductible on your Federal tax return).

4. Consult with your financial planner and accountant to make sure there isn't anything you've missed from your 2011 tax planning which needs to be finished prior to the year end.

5. Open your Keogh plan prior to the end of the year. This will allow you to include/deduct any contributions you make in 2012 before you file your 2011 return. (Simplified Employee Pension Plans can be opened for the prior year up until you file your tax return.) With extensions, this allows you until October 15, 2012 to fund your retirement plan.

6. Make sure to get all of your charitable donations for 2011 fully-planned and completed before year end. You'll need a receipt for cash contributions made to charity. Over the past few years, it is becoming more difficult to deduct cash contributions made to charities. Make sure you have good records in case you get audited by the IRS.

7. Sell any stocks on which you plan to take a loss or gain, prior to the year end. Tax loss and gain planning is a good tool when used with careful preparations. I've seen a few clients lately who have good sized carry over losses on from prior years' tax returns. If you have any carry over losses, you can use them to help offset any current capital gains.

8. If you own a business, you can purchase equipment and supplies for next year before the end of this year. Be sure to plan the best year to place those purchases.

9. When applicable and feasible, push any income or capital gain into 2011 in order to prevent them from ending up on your 2010 return. (Waiting approximately six weeks should put off the taxes for one year).

10. Make sure you talk to your accountant about how the Alternative Minimum Tax might affect your 2011 tax return. I suggest you ask your accountant or tax preparer about deductions you may want to take in 2011 to see if they still make sense when taking the Alternative Minimum Tax into consideration. This would include prepaying property taxes and state income taxes before the year is over.

Good tax preparation goes hand in hand with solid investing and properly planning your cash flow. All of these items are ways to keep what you make; while making it work harder for you.

Slowly, very slowly, it seems the U.S. economy is moving forward. We continue to get signs of improvement. While they are not telling us that strong growth is around the corner, I think they are telling us that things continue to get and feel better.

Consumer confidence is improving as witnessed by the most recent number. Last weekend's holiday season sales showed solid improvement as well. Even a local jeweler I've known for years said his sales were up. He'd been saying things hadn't gotten better in four years. I've heard preliminary numbers that last weekend's sales were 9% better than 2010. I also heard a report that said they were 16% better. Either number is a solid gain over 2010.

Today we learned that the economy added 120,000 jobs in November. Again, this isn't the 200,000 per month that's needed. However, it's clearly a continued step in the right direction.

There are still many corporations sitting on billions in cash waiting to be deployed. Corporate debt is down and profit margins are, in many cases, excellent.

There's still lot of work to be done. We need more jobs and they probably won't all arrive next year. We need more lending to both businesses and consumers; banks are sitting on too much cash with no place to go with it. The real estate market probably has two or three more years before it shows any real signs of upward movement. (This is based on the number of foreclosures still needing to be handled and the need for more people to work and want to buy homes.)

Finally, Europe is working on getting its house in order. This week central banks took another step by making money cheaper and more available. There's more work for them to do, but I think they'll get it done. I do think the Euro will stay intact. It probably won't happen easily, overnight, or without the pains that come with resolving their debt and banking issues. There's a lot of pressure on them to get it solved in Europe and all over the world.

It's good to see the signs of improvement here because I don't think these issues are solved in one fell swoop - I think they're solved slowly, one piece at a time. In other words, they won't raise a flag and say it's over, things will simply be better and people will stop hearing about the tough issues we've been going through.

On behalf of my team, we would like to wish you and yours a very happy and safe Thanksgiving holiday.
Remember to begin thinking about your tax planning for 2012; by starting now you'll get the best return with the least amount of stress.

Best wishes,

David W. Cryden, CFP®

Many of you have been with me for more than two decades. We've been through lots of good times and some tough periods as well. You all know that one of my favorite words is perspective.

It's with a balanced and proper perspective that one can make better investment and economic decisions; be it on a personal level or a business level.

Occasionally, I'll use a letter written by James F. Rothenberg, Vice Chairman, Capital Research and Management Company, investment advisor for the American Funds to bring additional thoughts and perspective to the discussion.

I believe you'll find the following letter he wrote in September 2011 of interest as we look back on the year and look forward into the future. I've always found his more than 40 years of experience in the investment business helpful in providing a view most people simply don't have or read too often. I've been in the business nearly twenty nine years and fully agree with what he's written.

Letter from James F. Rothenberg

Don't hesitate to call or write with your questions or thoughts.

It's not often I get to write a Tip of the Week on 11/11/11. While out of town last weekend, a gentleman asked, if we'd see the date 11/11/11 again? My answer to him was a simple, yes, if you live another 100 years!

It's also not often that the headlines in the daily financial news have a tremendous long term impact on your portfolio. Here are a couple examples I've had in my office from September 1, 1998. These two headlines came out the same day and were written across the front page of the San Francisco Examiner and the San Francisco Chronicle.

The first headline came out that morning in the San Francisco Chronicle:

"Panic Hammers Market"

The second headline came out in the evening edition of the Examiner that same day:

"Stocks Bounce Back"

There are all kinds of headlines these days and articles telling you what to do with your money. Many of them reflect short term thinking. Others are sensationalists. Some provide you with information that helps you continue to develop your thoughts as a long term investor.

Whatever you read, the trick is not to get caught up in the minute to minute, hour to hour, or day to day writings designed to draw you in to watch, or to read, what's being presented. If you do, you might lose your perspective as long term investors. As a result, you may make an investment decision based on short term situations that have nothing to do with long term investing.

The other thing people can end up attempting to do is timing the markets. In my humble opinion, it's nearly impossible to successfully do market timing long-term. There are just too many things that happen that are not predictable. The old cliché is that no one who is truly wealthy did it by market timing.

If you find yourself wondering what to do with all the conflicting headlines and news stories, give me a call. Let's talk about your thoughts and concerns. There's no point overreacting to short term news and issues when you're a long term investor.

Europe presented its plan to handle Greece's debt, and the overall debt issues they face, late last week. As I anticipated, the markets reacted favorably last Wednesday, Thursday, and Friday. Uncertainty never seems to get a favorable reaction from the financial markets. In a surprise move yesterday, the Greek Prime Minister, George Papandreou, has asked for a referendum.

This has created more uncertainty in the short term. Apparently, the Greek public loves being a part of the Euro Zone and doesn't love the deal the Euro Zone and IMF have cobbled together to help with the severe debt issues. (I won't express my personal opinion of the referendum move. However, if the Greeks were to reject the deal, it could cause them to go into bankruptcy and cause more uncertainty in Europe.) It seems to me the Greeks have no choice but to accept this deal.

The European plan for the most part, is exactly what was expected and I had written about it in last week's tip. We'll see if it's enough or if they need to do more to keep moving in the right direction. It clearly seems to be a step forward and not backwards. Please see the Archives for last week's Tip if you'd care to review it.

The U.S. economy grew at a 2.5% pace in the third quarter. It's the fastest pace of growth in a year. Some of the growth may come from resolving some of the supply chain issues in Japan and lower gasoline prices (though you'd never believe gas prices are lower living here on the Central Coast). Consumer activity was back showing a 2.4% increase after slowing to a very modest .7% increase in the second quarter of this year.

Employment activity was steady as well. It continues to point to what we've been expecting for quite a while now: steady, slow improvement in the economy and unemployment rates. Historically, this has been how we come out of banking generated crises. This crisis recovery seems to be no different.

Are things looking up? Assuming the Greeks stop the insanity their Prime has created, I think things are looking up. Certainly the markets should point in that direction if this is solved soon. The economy is back on a more positive track. A double dip recession looks less likely. The Europeans seem to be committed to a better track. When uncertainties are either eliminated or become more clear, investors and businesses can begin to think about the future with more clarity. My thoughts are that this may be an inflection point for now that helps more things forward in a meaningful way.

If you have questions or thoughts, don't hesitate to write or call.

In part, last week's tip addressed the debt crisis in Europe. Today, I continue to take a look at this issue.

The European Union (EU) is in the throes of working out a solution to their debt crisis. They have been negotiating all week and will continue to do so over the weekend. This is all leading up to a summit planned for next Wednesday.

Today, the EU agreed to give Greece another 8 billion euros ($11 billion dollars) to stem the tide of default. At the same time, the Greek government approved another austerity program which reduces their costs to operate the government. These solutions are not all that's needed in Greece, but continue to help their situation some.

There are three areas being discussed by the 17 countries in the Euro zone dealing with how to solve the debt crisis in Europe. These discussions are leading up next to Wednesday's summit with the hope of being able to announce a grand scheme aimed at resolving their troubles.

The first area of the grand scheme is reducing the Greek debt. There is simply too much debt and not enough revenue to make the interest payments on it. The Greeks' debts are over 160% of their GDP. (The US national debt is roughly 100% of our GDP. The Greek situation shows us that we clearly don't want our national debt to be much higher.) Their debts need to be reduced so they can be serviced in full and on time. There are discussions geared towards getting the overall Greek debt down to either 152% or 120% of their GDP by 2020. One of the by-products of getting the Greek debt reduced through discounts and write offs is losses that will be taken by the banks who lent them money.

The second phase in a grand scheme to help the EU out is how to shore up the banks' reserves if they take losses from write downs on their Greek debts. There is talk of the banks raising their reserves to 9% of deposits by next summer. If some banks can't make it, some discussions are aiming towards their governments stepping in and helping them make those reserve targets. Either way, shoring up the banks' balance sheets and reserves is critical.

The third phase of the plan is how to make the European Financial Stability Facility (EFSF), or their bailout fund, more effective; I read reports earlier today that both France and Germany, who are, (financially the largest countries in the Eurozone) have been disagreeing over how to do so. Everyone agrees that this fund presently isn't large enough to handle providing weak banks with the capital to boost reserves they need, and to help countries who may be dragged into the malaise like Spain and Portugal. There is talk of developing ways to leverage the present fund without adding more cash, which would create additional capital for the EFSF to deploy.

The news today was enough to give markets some sense of confidence. This translated to a big jump in the indexes. The DOW Jones 30 Industrials is now in positive territory for 2011.

My feeling is that if a comprehensive, workable, and intelligent plan is developed and deployed, the markets should continue to progress and confidence should improve. Hopefully this will happen and we'll see things take a step forward in many respects in the aftermath.

There are two primary areas of interest when looking at where the world is today: its economic challenges and its recovery.

I found two interesting articles this morning online, which get into some depth on each topic. One covers the recovery in the US economy and the American psyche. The second focuses on the debt issues in Greece, European banking issues, and the rest of the Eurozone.

In essence, the United States continues to be in a 'grind it out' recovery. The following article points out how this has been going on for thirty months now. The issue is that the American psyche doesn't feel it. In fact, we're living in a state of waiting for the next shoe to drop as a result of what we lived through in 2008 and 2009.

Looks Like Expansion, Feel Like Recession

The troubles in the Eurozone need to be addressed. I believe we are finally coming to the point where they are going to be addressed in earnest. There are meetings planned over the next few weeks which should show where many solutions may lie. As you can see by the market's reaction this week to the German and French pledges to find meaningful solutions, the issues in Europe are real and being taken seriously by the rest of the world too. The market reacted well to the German and French pledges. I suspect meaningful plans will go a long way towards helping the entire world economy move forward.

Europe's Crisis Bill

As always, please let me know if you have any questions.

Our world continues to change in so many ways economically. The biggest and most important changes are happening in the emerging markets. They are providing us with tremendous opportunity and challenges. These opportunities and challenges will be with us over the years and decades ahead. In understanding this, it's clear that energy and resources will both fit into the aforementioned statement.

The following videos, roughly 20 minutes worth, give interesting takes on the challenges and opportunities our planet faces when dealing with both oil and natural resources.

Drilling Deep Into Oil and Mining Industries

Historically, the month of September has been the worst month of the year for the financial markets. This September has certainly followed in the footsteps of past years with the Dow moving as much as 10% from its high to its low of the month.

It is difficult to say why September has been such a tough month for the stock markets -- it's just that way.

Along with the political, geopolitical, and economic dislocations you get from time to time, there are a couple of normal activities that happen every September. They, combined with the aforementioned, can all contribute to the market's movement.

September marks a period when some companies might pre-announce any changes in their guidance or financial expectations. This can be a contributor to some market volatility.

In addition, some portfolio managers do what's called "window dressing" at the end of a calendar quarter. They sell holdings they don't want the public to see in their portfolios at the end of a quarter. They may also add holdings that they would like the public to see in their portfolios. Not all mutual funds participate in this short term kind of game. Window dressing can contribute to short term market volatility.

If you're a long term investor, my suggestion is not to consider a tough September anything more than another buying opportunity in a long bear market.

Here's an additional thought for you to keep in mind: the yield on many blue chip stocks today is higher than that of a ten year US Treasury bond! That means you should be able to invest in a blue chip stock mutual fund and get a higher dividend than that of a ten US Treasury bond! Plus, the blue chip stock fund has the potential to grow your investment's value. The bond does not grow in value, nor does its income. The blue chip stock fund can also grow its dividend over time as well.

Keep your mind on your long-term goals while continuing to take advantage of short-term volatility.

In order to truly plan for retirement, you need to have an idea of what you will need for income during that time; in order to do that, you'll want a baseline or barometer to begin planning.

A good way to get a feel for what retirement income you might need is to truly study what it takes to live today. Here are a few steps to take to help you reach this goal:

1. You'll need to have a very accurate accounting of today's living expenses as a starting point. I can provide you with an Excel spreadsheet I've designed for myself and my clients to help with this very detailed task.

2. Next, review your current expenses with an eye towards which costs will continue and which will end once you are in retirement. For many families, a good example of this would be the cost to raise and educate their children.

3. The final step in this phase of your retirement planning is to include the new or additional expenses you know you will have in retirement. For example, some people like to travel more or start a new hobby while others will focus on long term insurance costs, etc.

Remember to keep these expenses realistic; do not fool yourself by attempting to see what you can survive on during your golden years. Always aim high on expenses: that way if you're off-base, the chances are that you will have estimated too high and have extra income - not extra expenses.

The exercises I've outlined above are critical to effective retirement planning. Whenever I meet with a client to discuss their retirement, these steps are always part of the equation.

If you, a family member, a friend, or colleague needs help with their retirement planning, don't hesitate to give me a call so we can set up a time to meet.

I am constantly reading about how the new electronic gadgets in our homes are using far more electricity than we could imagine. The beef is that they're constantly drawing electrical current even when we think they are off. The following article gives you a sense of what may be happening in your home.

ENERGY CONSUPMTION

In countering the constant threat of these electricity eaters, I've been reading about power strips called, "smart power strips." They apparently can determine when you're not using a device and turn off the power to it. This can potentially save you hundreds of dollars per year, if not more, and I've heard you can find "smart power strips" for as little as $20. I've done a little research and I haven't found any in that price range yet; though I intend to keep on looking. Staples has the closest I have found for around $50+ which is worth considering. Based on what I've been reading, they should pay for themselves in less than a year.

Another monthly savings tip relates to your internet modem. If you have Charter Cable, you may be renting your internet modem for something like $10 per month. You should be able to buy your own for roughly $100 or less. Using simple math, your new modem should take less than a year to pay for itself. I did that several years ago with great results.

Finally, if you do find a store selling the "smart power strips" for approximately $20, let me know so I can pass the information along to everyone else.

Have you ever wondered what the value of your working career might be if you could calculate it? Here's a simple tool I found online which can help you make that calculation. It estimates the value of your work over the length of your career. It'll certainly give you valuable information that can be useful when considering your past, future, and financial plans.

Knowing the value of your working career can also be utilized to determine if you want to insure those future earnings. The insurance most people use to protect their earning power is disability insurance.

This tool may also be utilized by a retiree who may be considering the amount of long term care insurance that they may want or need.

Here's a link to the website:

Human Capital Calculator

Please don't hesitate to write if you have any questions.

Asset protection comes in many sizes, shapes, and forms. With fall and winter just around the corner, it's time to start thinking about protecting your home from the cold and wet weather:

-Check your drains for clogs by running water through them.

-Check your roof for leaks.

-Clear debris away from the pathways where water runs through your property. This will prevent the water from pooling or creating a dam during heavy storms - we all know what happened last year.

-Have your chimney inspected for dangerous deposits. Deposits could lead to a blockage of smoke leaving the house or even a chimney fire.

-Make sure your heater has a safety inspection and the air filters are clean.

-Review your homeowner's insurance policy with your agent. With the decline in the value of real estate, it's possible you may be paying for too much coverage. Make sure your policy covers the current value of your home and the costs of potential repairs or replacement.

Remember, last year was an amazing year with far more rain than average. Make sure you're prepared so you don't have to deal with emergencies as they occur. Staying one step ahead of problems can save you thousands of dollars and hours of stressful work.

Here's an interesting economic perspective from three weeks ago. As you know, I'm a big believer in focusing in long term trends; not so much short term dislocations or disruptions in the market or economy. I'm also a big believer in seeing past the noise in the press and looking at what really seems to be going on in the markets and economy.

I think you'll find the following article interesting as it offers a perspective you don't receive in the head lines:

Major stock market indices are down 4-5% today as investors move into panic mode. There is no single piece of news driving the sell-off; rather the market seems to be gathering downward momentum on its own. Selling is creating more selling.

Like 1987, the sell-off does not appear to be driven by fundamental factors. In fact, the fundamentals suggest that the market is undervalued and getting more so as it drops. Many investors assume (or wonder) if the sell-off is indicating deep economic problems. However, there is no evidence that this is true.

The Federal Reserve is still running a very accommodative monetary policy. Money supply data shows no contraction; M1 is up 13.8% and M2 is up 8.3% at an annual rate over the past thirteen weeks. The Fed is holding the funds rate near zero, while nominal GDP is rising near a 4% annual rate recently and "core" inflation is at 3%. In other words, interest rates are very low in comparison.

If you are worried about a cut in government spending - don't be. Federal spending in 2011 is still rising and according to the Office of Management and Budget (OMB) and Congressional Budget Office (CBO) it will rise each and every year over the next 10 years. If you're worried about the size of government and think the budget deal was terrible - you shouldn't. Supertanker America is turning and government spending as a share of GDP is scheduled to fall by about 2% of GDP over the next 10 years.

Corporate earnings are rising rapidly. According to Bob Carey, First Trust's Chief Investment Officer, approximately 80 companies are left to report, S&P 500 earnings are up 20% over last year, and the S&P 500 P-E ratio (on forward earnings) is roughly 12. The market is cheap.
Economic data are not tanking. Initial claims are at 400,000 (down from 478,000 at the end of April). Car and truck sales were up 6.9% in July (over June) and chain-store retail sales were up 4.6% in July (from last year) versus a 2.8% year-over-year growth in July 2010. Taken together, retail sales appear to have increased by about 0.7% in July even though gasoline prices fell.

Yes, the ISM manufacturing index was just 50.9 in July, but that is the 24th consecutive month above 50 and is consistent with 2% or more real GDP growth. Finally, the ADP employment report showed 114,000 new private sector jobs in July, which was the 18th consecutive monthly gain. In other words, there is absolutely no evidence of a recession at this point.

This leaves us at perhaps the best explanation for the decline: European debt problems, specifically Italy. It's clear that hot money is moving as investors worry about money market funds and bank solvency. The euro is falling, European bond yields are rising, US Treasury yields are plummeting and gold is up. Italy says that it doesn't face imminent default, but the market acts as if it may.

European countries have spent themselves into a corner, but correcting this mistake will be good for long-term growth, not bad. While some financial institutions may take losses, government debt itself is water under the bridge. It's a sunk cost. As a result, it has little effect on the economy unless losses create financial contagion. With mark-to-market accounting fixed to allow cash flow to be used to value assets, the odds of contagion are minimized and the cost of immunizing America from contagion would be small when compared to 2008.

In the end, the sell-off looks as if it's more of a technical correction in the market, not a fundamental change in direction. This does not mean that it will end soon; corrections run their course and then end. We wish we could trade each and every move in the market, but we can't, and we don't know anyone who can. We are investors, and the market is more undervalued right now than it was when it opened for trading this morning.

This week's tip is based on an article written by Brian S. Wesbury, Chief Economist & Robert Stein CFA, Senior Economist dated 8/4/2011.

If you decide to move on, getting another real estate agent may also be wise if you suspect that your present agent is inept or wants you to pay more than the house is worth to fatten his own commission check. A good agent's negotiating skills and knowledge of property values can save you thousands of dollars. An incompetent boob of an agent can cost you just as many thousands of dollars.

Prices dropped since you bought your home. This predicament periodically clobbers folks trying to refinance a loan. Real estate is an excellent long-term investment. However, like the stock market, the real estate market has short-term boom-and-bust cycles. For instance, suppose that you paid a record high price several years ago when you acquired your home at the pinnacle of a strong seller's market. In our hypothetical situation, the country is now mired in a deep recession, and houses like yours are selling for far less money. If that actually happens to you, don't kill the messenger for accurately reporting current property values.

Property prices aren't fixed. They slither all over the place. A house's fair (FMV) is based on what buyers offer and sellers accept. It's not a specific number - it's a price range. To push your appraisal toward the high end of FMV, have your real estate agent give the appraiser a list of houses comparable to yours in location, condition, size, and age that sold within the past six months. Unlike good real estate agents, appraisers generally don't inspect every property on the market. If your agent toured all these houses and the appraiser didn't have time to see some of them, your agent should review the properties with the appraiser to help the appraiser understand why the highest sales are the best comparables.

The appraiser doesn't know property values in your area. Suppose that, while looking for your dream home, you and your agent saw five comparable houses (near the home you want to buy) that completely justify the price you agreed to pay. If the appraiser comes in low under these circumstances, the appraiser may not know neighborhood property values.

When you suspect that the appraiser is geographically clueless, get a copy of the appraisal from the lender. Check the houses the appraiser selected to establish fair market value to see whether they're actually valid comparables for the home you want to buy. If they aren't, discuss your concerns with the lender. Find out how many appraisals the appraiser has done recently in the neighborhood. If the appraiser doesn't work in the immediate vicinity, the appraiser's opinions of value are suspect. In this situation, some lenders will have the property reappraised without charging you.

The lender is redlining. Redlining is the discriminatory act of refusing to make loans in specific neighborhoods that a lender considers undesirable. Because this practice is illegal, it's the least likely explanation or if you get the runaround, ask for a full refund of your loan application and appraisal fees; then take your business to another lender. You may also consider filing a complaint with the appropriate agency in your state that regulates mortgage lenders.

This week's tip is an excerpt from "Mortgages For Dummies" by Ray Brown. This week's Weekly Tip is part two of a two part series. Be sure to read part one from 8/5/11 to get the full story on Low Appraisals.

I was just speaking with a friend. I made the comment that what the markets do today, or in the short term, isn't as important as what the economy and business does in the long term. I believe this perspective to be true. I believe that when things are good, investors think long term. When the markets get tough in the short term, investors can suddenly drop their long term investment plan. They sometimes allow their emotions to get the better of them. It's never a good idea to let your emotions make your investment decisions.

Part of my job is to help you keep on task with your long term investment perspective and plans. It's my job to help you think like an investor.

Over time I've found written pieces which I believe are important in helping you learn and keep your investment perspectives. They can help you think like investors.

The following piece is written by Jim Rothenberg, Vice Chairman of Capital Research and Management Company. Jim is responsible for much of the investment and research which manages the American Funds. I've sent another of his writings to you in years past. He wrote this on August, 8, 2011, about the recent market actions in the past week. It's entitled:

What's Changed - What Hasn't Changed

Finally, many of you know that I believe that when markets are down, it's not a bad idea to add to your portfolio if you can.

Also, if you've been thinking about converting any of your Traditional IRA to a Roth IRA, down markets can make for terrific opportunities as the taxes will be lower when you do the conversion. If you have any questions about this or anything else, please let me know.

Low appraisals aren't restricted to transactions involving home purchases; they've sabotaged their fair share of refinances, too. Maybe the appraiser is absolutely correct - maybe not. What you do next depends on four factors that provoked the low appraisal:

You overpaid. Hey, it happens. Appraisals rarely come in under the purchase price. You and your real estate agent may be suffering from a case of excessive enthusiasm regarding your dream home's fair market value. For example, just because you're willing to pay $250,000 for it doesn't mean that anyone else in the whole wide world would pay a penny over $235,000. Or the appraised value may be low because the house needs a new foundation, a new roof, and other expensive repairs that you didn't factor into your offering price. In either case, be grateful the appraiser warned you before you made a costly mistake.

You obviously like the house or you wouldn't have offered to buy it. If, despite the low appraisal, you still want the property, don't give up. Arrange a meeting with the seller. Use the appraisal as a negotiating device to reduce the purchase price or to get an offsetting credit for the necessary corrective work.

The seller is stuck with the property. You aren't. If the seller won't listen to reason, don't waste any more of your valuable time. Instead, move on to find your true dream home.

This week's tip is an excerpt from "Mortgages For Dummies" by Ray Brown. This Tip is part one of a two part series. Be sure to read next weeks Tip for the complete story on Low Appraisals.

The debate rages on in Washington about the debt ceiling and our budget deficits. As this continues, the rage of the American people, and many around the world, continues to grow.

Today's tip is not a political column or statement. I'm writing merely to pass along a few thoughts about what we're seeing in Washington, D.C. at this moment.

It's my opinion that there will be a last minute deal on the debt ceiling. That's been my opinion all along. The game of brinksmanship everyone is playing on this issue seems misplaced to me. It seems to be more about politics and the 2012 election, than getting the job done in a responsible businesslike fashion. It's like playing chicken with the economy. I find this to be the wrong time and the wrong place for this game. Is there ever a right time for it?

I believe at the end of the day, we'll see the politicians do the right thing. It's the only thing they can do, they'll raise the debt ceiling and things will settle down.

Here's the real issue in my mind. The debt ceiling needs to be raised because we've been borrowing more money than we're generating in tax revenues for many years and the chickens are coming home to roost. The real issues that need to be solved are how to responsibly manage the income we generate so that we don't continue to raise debts, and how to get the current debt reduced to a smaller percentage of GDP. Clearly this kind of money mismanagement can't go on forever.

The challenges we face going forward are difficult. We've got a large debt. It's not going away overnight. In addition, we have global competition for work which makes raising salaries tougher. Labor can be hired overseas at lower costs. The baby boomers are turning 65 beginning this year. There are some 70 million of us. Even though we've known this day was coming and had years to prepare for the Baby Boomer generation's retirement, we've not prepared. There will certainly have to be changes to the entitlement programs in order to pay huge the costs of the Baby Boomers retirement. Finally, if our budget is cut too quickly, I think the recovery may slow down. We don't want this right now.

My take is on these issues is the following:

• The debt ceiling will be raised.
  
  
• Eventually global competition will subside some as the economies in the emerging markets grow and their wages rise. This is already happening some in China. Their labor costs are rising. It's all part of the cycle of growth worldwide we're in as the global economy develops. This will likely be a number of years down the road. It should help in the long term. I don't see it helping in the short term.
  
  
• The Social Security and Medicare programs will be adjusted to help reduce their costs. People with means (money or assets) will get less benefit than those without means.
  
  
• There will be a reduction in the budget deficits that in time should help. It can't happen too quickly or the recovering economy may very well suffer. I'm guessing we'll see more meaningful cost reductions in government spending in 2013.
  
  
• The historically low interest rates we see today should help reduce the costs of our government's debt. I think they should finance as much of it as they can at these low rates for the next 30 years in order to lower our costs long term.

I think this difficult period we're in will end with an improved economy. I think the emerging market economies should continue to grow at rates much higher than ours. I think they are the real driver of growth around the world. I think there will be an enormous amount of business created and hundreds of millions of new consumers will be developed making thousands of companies worldwide huge profits as these changes occur. I believe this cycle could go on for many years, even decades. It's a different world we're in today. It's truly a global economy. In the long term, I think everyone wins.

So what can we do about all this?

As you know, I've been a believer of investing in global economy for a very long time. What we're seeing is proof that there is huge potential and opportunity in investing both here and abroad in companies that are truly great global businesses. Despite the short term issues we're facing, I think the future is bright and there's huge potential for growth and profits to be made by investing in the global economy.

Every now and then when I am meeting with clients I realize that the story they are telling me would make a great Weekly Tip. Today's tip is about how you can share the load with family and friends. In this story, everyone wins, gets work done, and saves money. I hope you'll find it as good an idea as I did.

"Installing irrigation, laying tile floors, moving a garden shed, painting, weeding, planting, transplanting, pruning, and more are just a few of the things our co-op work groups does for each other. One day a month, six of us gather at one of our three homes to work from 9:00 am-3:00 pm on a list of chores provided by that month's host couple. We bring our own lunch and any appropriate tools that we have. The next month we go to a second couple's home, and the third month we show up at the last home. At the third couple's home we compare calendars and "sign up" for another 3-month session.

The hosts provide coffee and goodies for the morning coffee break, and an adult carbonated beverage when we quit at 3:00pm. If extenuating circumstances arise, one still has a commitment and must arrange a make-up day. It's amazing how much we have all accomplished in the last twelve years."

Every once in a while the American Funds puts out a short series of videos. Featuring their investment professionals, these videos allow us to get a perspective on the world, the economy, and the markets.

Here is investment professionals Winnie Kwan and David Riley discussing today's global investment landscape. I think you'll find their thoughts of interest as you look at the world for today and tomorrow.

Taking a Look at World Markets

I'm sure you'll find the nine minutes of videos in the attached link of interest.

I was meeting with clients Tuesday when one of them asked how they'd done the past ten years. They'd been hearing in the news how the past decade has been a wash and investors hadn't made any money.

I've been working with them for more than 20 years, so looking back over the past 10 years was easy to do. Like many of my clients, they've been faithfully coming in for their annual reviews each year. We were able to compare their portfolio ten years ago to today. They had done very well. In fact, they had certainly outperformed the indexes over the same period of time. It was clear that the past decade had not been a lost one for them.

Investing isn't about how the indexes do. They serve as a barometer for the markets; if you will. Investing is about owning positions in good businesses. There isn't an absolute direct correlation from your portfolio to the markets. Investing is about owning good companies and participating in their growth over the years.

If you haven't been in for a while, let's get together; go over your portfolio, financial plans, and needs. While we're at it, let's see what the past decade has done for you.

I used to write that when the markets were off five percent (5%), you should consider adding money to your accounts. If they dropped another five percent (5%), add again, and so on.

The Dow Jones 30 Industrials' 52 week high was 12,928.50. It experienced an intraday low on June 16, 2011 of 11,821. That's an 8.57% decline off the peak. A decline of 8.57% is not technically called a correction, but it's not too far off. Despite the fact that the markets were off and prices were lower than we've see in a while; people were still a little unsure about investing. In the long term, buying lower should be a good thing

I see a world with extraordinary growth in China, India, South America, other parts of Asia, and Europe. They say the world is adding 100 million new consumers a year. I believe this should be happening for years to come. I also think we'll see sales of products worldwide at levels never experienced before. This, to me, is a new world economic dynamic which should be here to stay.

Companies here, and abroad, are showing terrific profit margins and have lots of cash to use for eventually hiring new employees and developing new products. We're talking trillions of dollars here in the U.S. alone. As sales increase, we should see even better profits. Higher profits should equate to higher share prices.

I think, if you look past the current problems working their way through the economy today, this should be a terrific time to invest. When the market declines, I always think its worthwhile talking about potentially adding to your portfolio.

I realize some investors are still nervous after what we all experienced in 2008 and early 2009. I understand that. However, I urge you to keep in mind that life goes on, people still buy goods and services; and in this case, the world should continue to grow.

I hope you have a safe and sane Independence Day. I think we have a great deal to be thankful for living here in the United States of America. It's the rest of the world who are emulating what we've done here. That can't be all wrong.

"If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest." - Benjamin Franklin

I've been a huge believer that knowledge and perspective are two key factors in becoming successful with your money, goals, and investments. I think Ben Franklin's statement above says a great deal.

If you take the time to learn about your money and investments, no one can take that valuable resource away from you. I love teaching my clients about their investments and other financial planning issues and solutions. It makes for better results and happier clients.

There was a commercial many years ago talking about how most people spend more time working on their two week vacations than they do their financial planning and investments. I encourage you to take more time every year to invest in your financial and investment knowledge.

I also encourage you to come in to talk about what's going on in your lives and your portfolios annually. It's a well invested hour of your lives and it comes without any additional costs.

We hear the news every day. There's always something good and something negative to see. That's the nature of the beast. It's the nature of life itself. There are good days and bad days. Hopefully, you'll see far more good days in your life than bad.

Either way, each day of our lives makes up just a little portion of our overall lifetime. The financial markets in many ways are just the same. There are lots of short term trends and happenings that make up the day to day movement of the markets themselves. However, it's rarely the day to day stuff that makes up the long term trends and performance of investments or the markets themselves.

As investors, I urge you to remember that it's not the day to day that matters. How many of you remember one day to the next when you think back on the markets over your lifetimes?

In fact, there are just a few days that come to mind for me. As time moved on, they become just memories of events or short term movements of investments that ended up being a part of the long term trends. Any given day has hardly ever been a watershed moment affecting my investment life long term.

I say all this in conveying the message that economic and market recoveries take time. At their best, they can be very uneven. They have their ups and downs. There are days when it seems we'll never get to being fully recovered and other days when it seems we'll make it tomorrow. The funny thing about economic recoveries and market recoveries is that when we're fully healed and are moving back into an expansionary cycle, there will be no announcements or bells that are rung. It will all happen kind of quietly and uneventfully.

Nonetheless, I believe we'll see those days again. I believe we're on the way there now. This time, I think we'll see it all continue to be led by the emerging markets and not the United States. This time, I believe it's the rest of the world that helps us get there. So, keep your perspective and be patient. As with anything in life, the good things take time.

Now more than ever, preparing your home for sale is very important. I ran two Tips of the Week five years ago which discussed in some detail how to prepare your home for sale. I'm going to re-run these tips as I think getting your home ready to be sold is so very important in a difficult real estate market. I hope you'll find them of help for either yourself, a friend, or loved one.

This is Part Two in a two part series about preparing your home for sale.

Curb appeal draws buyers into your house. But appealing interiors make the sale.

You don't have to spend tens of thousands of dollars on your house prior to putting up the For Sale sign. On the contrary, the little things you do generally give the biggest increase in value. Concentrate on the three Cs - clean up, clear out, and cosmetic improvements.

Clean, scrub, and polish everything: Your appliances, the walls, floors, bathtubs, showers, and sinks should be cleaned until they sparkle. Buyers will notice strong smells as soon as they walk through your front door, so eliminate smoke, mildew, and pet odors. Cleaning your drapes and carpets is a great place to start, but be thorough and clean your cat's litter box, remove ashes from the fireplace, and eliminate any signs of cigarette smoke from inside your house. Fix drippy faucets, and if your sinks or bathtubs drain slowly, unclog them. Buyers consider leaky faucets and clogged drains a sign of poor maintenance and, more often than not, they're right!

Get rid of clutter: Keep clutter off kitchen counters and dirty dishes out of the sink. Eliminating clutter and excess furniture makes rooms appear larger. Closet space sells houses, so create additional space in them by weeding out all those old clothes you never wear anymore. Like it or not, serious buyers will inspect your closets and open built-in drawers. Be sure they're neat and roomy.

Ironically, the clutter that reduces your house's value is far from worthless. On the contrary, your junk is someone else's treasure. Make a donation to your favorite charity and earn a tax deduction (be sure to ask for a donation receipt). Have a garage sale. Who knows? You may make enough from a garage sale to pay for your move!

Make cosmetic improvements: Painting isn't expensive if you do it yourself, but be careful when selecting interior colors. Avoid cherry red, canary yellow, cobalt blue, emerald green and other bold colors with strong visual impact. You may love the effect, but you aren't the buyer. Just because we recommend using neutral colors doesn't mean that you should turn your home into a bland boring blob of mush. Give it some spice by using area rugs, table cloths, napkins, sofa cushions, window curtains or drapes, bedspreads and quilts, bath and hand towels, shower curtains and so on - to create temporary color accents in rooms. Unlike the more permanent improvements, you can take these items with you for use in your next home.

Selling your house will be time consuming and could cost some money. However, the value gained through utilizing these key points could be the difference between your dream home and simply your next home. Stick to these and improvements and you'll be sure to get top-dollar for your house.

This week's tip is an excerpt from "House Selling For Dummies" by Ray Brown.

Now more than ever, preparing your home for sale is very important. I ran two Tips of the Week five years ago which discussed in some detail how to prepare your home for sale. I'm going to re-run these tips as I think getting your home ready to be sold is so very important in a difficult real estate market. I hope you'll find them of help for either yourself, a friend, or loved one.

This is Part One of a two part series about preparing your home for sale.

Getting your house ready to put on the market takes time. Exposing your property to the market before it looks its best gives buyers and agents who tour the house a bad initial impression. It's nearly impossible to get them back for a second look after you correct the showing flaws. After you read prepare your property for marketing.

Most buyers make snap judgments about your house. Their first impressions, good or bad, are generally lasting impressions. Buyers begin forming their opinion of your house long before they go inside. Curb appeal, the external attractiveness of your property when viewed from the street, is critically important.

No matter how magnificent your house is on the inside, many buyers will drive by your house without stopping if the property lacks curb appeal. Your house's exterior and landscaping will either attract buyers or repulse them. Here are some tried-and-true ways to enhance your house's curb appeal:

Painting: Painting your house's exterior before you put it on the market gives the biggest bang for your fix-up buck - if you use colors that conform to your neighborhood's decorating norm.

Lawn: A freshly mowed, neatly trimmed lawn gives your house a well maintained appearance.

Sidewalks: Sweep your sidewalks daily.

Shrubbery: Remove or replace any dead or dying trees, hedges, or shrubs and prune anything that looks scraggly or overgrown.

Flowers: Filling flower beds with seasonal flowers is an inexpensive way to add color and charm to property.

Repairs: Be sure that all gutters and down-spouts are in place and clean. Replace missing roof shingles and broken or cracked windows. Repair cracks in your driveway and remove large oil stains. Replace repair broken stairs, torn window screens, broken or missing fence slats, and defective doorknobs. Make sure that your front and back doors, garage doors, and all windows open easily. Check exterior lights to make sure they're working properly.

Windows: Keep you windows spotless inside and out throughout the marketing period.

Eliminate or hide clutter: Clear everything you don't nee out of the garage.

If just reading this list makes you tired, you're not alone. You probably lack both the time and the desire to do all of this prep work yourself. If you can afford it, make your life easier by hiring competent folks to help you with these chores. Your real estate agent, if you're working with one, can probably refer you to people who specialize in this kind of work.

This week's tip is an excerpt from "House Selling For Dummies" by Ray Brown.

As the markets recover, let's take a different look at managing risk. Most people think of risk as being synonymous with loss. Realistically, risks come in many different sizes, shapes, and forms.

There's the risk most people think of first, losing all your money. When investing in fundamentally managed mutual funds, the risk of losing everything should be very low.

There's also the real risk of losing the purchasing power of your money when your money is invested too conservatively in savings accounts and certificates of deposits (CDs). You can almost be guaranteed that your money will have less purchasing power as time goes on. This is also true in reviewing the interest you earn with CDs and savings accounts. By the time you pay taxes on it and account for inflation, you may very well have a negative real rate of return.

It seems to me that the best way to handle risks is through the proper diversification of assets. Here are three interesting terms to think about when investing and considering various risks:

"Recognized risks" are about understanding the nature of the risks you are taking when you invest. This perspective helps an investor understand the risks they are taking. It's important you have this knowledge before investing.

"Rational risks" are risks you take that are within the tolerance of your ability to sleep at night. In other words, you are able to handle how your investments behave and the possible outcome, be it positive or negative.

"Rewarded risks" are the returns you get for the risks you are taking. Are you getting enough return for the risks you are taking? Or, are the risks too high for the potential return you may or may not get?

It's important to have the proper understanding, knowledge, and tolerance of risks before you take them. This will help you be a better and more tolerant investor as your investments perform over the years through various economic cycles. Knowledge equals understanding and better results.

I start my day looking at the internet to see what the market's a doing and what the media is giving us as that day's headline. Then, as I get ready for work, I watch Bloomberg looking for the broader flavors of the day and for the underlying long term trends in the markets, economy, and any world news that may be relevant. (I used to watch CNBC. However, I feel they were too focused on today's trade. )

In an interview on my radio show years ago, I asked Maria Bartiromo, CNBC anchor, if she felt the media had anything to do with the dot.com bubble and its subsequent bust. Her comment was that they (CNBC) could have had something to do with it. I asked her this because I felt that the reporting going on during the dot.com bubbles seemed more like a sporting event than that of long term market trends and economic news. Since CNBC captures a large audience, and has tended to focus more on the trade of the day and the short term trends are in the markets, I've always felt it was, at times, almost dangerous for people to read too much into such short term thinking.

Even today, media outlets report what's going on in the short term. The problems I see with this are twofold:

1. People may react to what they are seeing over the short term. They may end up with more of a trader's mentality rather than that of a long term investor.
2. If the reporting and news we get is too short term in nature, we may miss the long term trends which (in my opinion,) are far more important in making money as an investor.

If we're to be investors and not traders, we need to realize that short term trends come and go. Financial markets will have the short term dislocations making people nervous sometimes. That's no reason to overreact. Long term investing means owning strong assets that grow over time. In the case of common stocks or common stock mutual funds, that means allowing the time necessary to let the businesses we're invested in to grow their sales and profits. This doesn't happen overnight. It happens over the years. Nor it is truly relevant to what the indexes are doing. Each company is its own separate business growing, or not, in its own way and time. They are not the markets or the indexes.

The media won't sell too many papers or too many ads for their broadcasts if they don't keep them exciting or even sensational at times. In doing so, we tend to get more reporting based on short term types of events going on in our world day to day. We, as investors, need to be able to see through the flavor of the day to get to the real news, the long term trends, and economic activity that will make a difference in our world and investments in the years ahead. Generally, that news isn't all that exciting. But, it's actually more important and relevant.

Next time you find yourself reacting to something you're reading or hearing, ask yourself if it's critical to what's happening in the world long term and to your investments specifically. It's time to remove the flavor of the day from our investment world and how we view the news we watch.

Everyone has insurance coverage of one type or another. Insurance is the spreading of risk throughout a larger group of people. In doing so, we all pool our premiums with that pool of money paying claims to those who need the help. It's important to realize that as much as life changes; you need to make sure that your insurance coverage stays current in case you need to file a claim.

Let's take a quick look at the most common types of insurance people carry today and why you want to review it.

Health Insurance: Premiums keep rising. You may want to consider a higher deductible to lower those premiums. Do you need to see if there's a better policy out there for you?

Life insurance: People are living longer. Premiums are coming down as payouts by insurance companies have longer periods of time before they have to pay a claim. Could you get a cheaper policy on a cost per thousand dollars coverage basis?

Auto insurance: Have you reviewed your policy to see if your liability coverage is appropriate? Is your car getting older? Do you still need to carry collision insurance? Can you lower your premium by raising your deductible?

Homeowner's insurance: Can you raise your deductible and lower your premium? Many people rarely have claims on their homeowner's policy. Maybe a higher deductible is worth a look? Is your liability coverage the proper amount? People's net worth is down in some cases, perhaps you can lower your liability coverage? Do you have the proper amount of coverage for your home if you need to rebuild it?

Earthquake insurance: There hasn't been a major quake in years. This has left the California Earthquake authority with a large pot of money for claims. Premiums are way down now. Perhaps you can either pick up a policy you didn't buy before or you could lower your deductible without raising your premium much?

Disability Insurance: Do you have disability insurance? If not, your ability to earn an income is your most valuable asset. You need disability insurance to protect it! If you have it, when's the last time you reviewed it relative to your current income and responsibilities?

Renter's insurance: Do you rent? Do you have a renter's insurance policy? If not, what happens if your place is robbed or burns down? If you do have it, is your coverage adequate with any changes in your possessions or needs?

Umbrella liability insurance: Many people have umbrella liability policies. Is yours current relative to your net worth? Since the value of real estate is down, perhaps your policy is more than you need if your net worth is down enough due to the changes in the value of real estate?

Long term care insurance: You may need it if you can't afford to handle the cost of long term care yourself. If you have it, it pays to get your policies reviewed now and then.

All of these policies should be reviewed periodically. If you haven't done so, let's talk or give your agent a call where applicable. Life changes and so does your need for insurance.

As of this writing, the Dow Jones 30 Industrials stand at 12,635. On October 9, 2007, the Dow Jones 30 Industrials closed at 14,164.53. The recovery in the stock markets from the crash of 2008 and 2009 is done. The markets have passed the point where they were when the crash occurred on September 15, 2008.

The last trading day before the markets crashed was September 12, 2008. The Dow closed that day at 11,422. As you can see, we're almost 13% above the pre-crash levels on the Dow and other indexes worldwide.

Today, the Dow is about 10% off its high of 2007. We are getting close to complete recovery in every sense of the word.

Here's a partial list of what's going on economically.

• Today the economy added 244,000 jobs.
• We've got growth in the emerging markets, who are adding 100 millions new consumers a year to the world economy.
• Consumer confidence and spending are better.
• Investors are putting money to work in the markets.
• This is only the second year of what should be a long recovery.
• Corporate America is enjoying some of its highest profit margins in years.
  

I think we'll see that last 10% recovery in the stock markets. I think we'll see more. I think we'll hit news highs in the years ahead. I'm optimistic about the long term outlook for global investing. I even am optimistic about the outlook for many American companies doing business worldwide.

They say it's always darkest before the dawn. I believe the sun is rising. You won't want to miss this one. It should be a beautiful day.

Here's a terrific tip from my good friend, Ray Brown's book, Home Buying for Dummies. He talks about bargain hunting for real estate. Like anything in real estate, sometimes a bargain really isn't a bargain. As they say, if it seems too good to be true, maybe it is too good to be true.

"If a house has major problems, it's not a bargain at any price. Who'd want a house located next to a garbage dump? Or what about a really ugly home? Just because the seller made a fortune in the sausage business doesn't mean that you (or anyone else) would want to live in a house built in the shape of a giant hot dog. Maybe the house is cheap because a contractor says it's a wreck about ready to fall down - you'd spend at least $125,000 after you bought if for a new roof, new foundation, new plumbing, and complete rewiring.

Enormous deficiencies like these are called incurable defects. They aren't economically feasible to correct. There's nothing you can do if a house is poorly located. Nor does it typically make sense to pay $175,000 for the hot-dog house so you can tear it down and build a new home (unless that's what comparable vacant lots sell for). By the same token, if you pay $175,000 for the wreck and then pour in another $125,000 on corrective work, you'll have the dubious honor of owning the most expensive house in the neighborhood. "

In this day and age, with all the foreclosures out there, make sure you do your due diligence. Without it, you make one of the biggest mistakes of your life.

Couples who remarry or are going to remarry, may have assets and children. There is estate planning challenges presented with the combination of life factors.

Spouses will want to take care of their surviving spouse when they pass on. At the same time, many spouses who come to a marriage with assets will want to make sure that their children, if they have them, receive their inheritance. If you don't plan properly, it can be a tricky situation.

One estate planning tool which exists, and may be of help to you, is called a Qualified Terminable Interest Trust. It's more commonly referred to as a QTIP trust.

In the most simplistic of terms, a QTIP trust can provide income for life to a surviving spouse. (There are certain terms which have to be met for the QTIP trust to legally work.) While providing income for life to your surviving spouse, it can also preserve your assets for your children or other beneficiaries.

A QTIP trust takes work to establish and isn't for everyone. But, it does provide the potential to utilize the estate tax laws in such a way as to provide income for a surviving spouse while still preserving assets for your heirs.

Please consult your estate tax attorney if you have an interest in establishing a QTIP trust to make sure it is for you and is done correctly.

Further, with all recent and potential future changes in estate tax laws; and how they may affect your estate planning, I suggest you consider a periodic review of your personal circumstances with your attorney.

Long-term interest rates are higher than they were a year ago. Federal banks in emerging markets are beginning to raise their short term interest rates. Inflation is showing some signs of rising. Commodities prices are rising. There are more people talking about inflation today than there were a year ago. There is steady talk of a recovery which is entrenched and moving forward.

All of the above are signs that the economy is on a slow march toward recover y and even expansion. I wrote a while back that when we started to hearing regular talk about inflation, we're likely on our way towards higher interest rates. I think it seems safe to say that the recovery is moving along and that higher interest rates should be more of a worry than lower interest rates and deflation.

I like to speak about bonds in terms of a teeter totter. If you have interest rates on one side of the teeter totter and bonds values on the other; when interest rates rise, bond values usually decline. When interest rates drop, bond values rise.

We are currently at interest rates which are at, or near, historic lows. It's my humble opinion that when the direction of interest rates changes again, they will be rising and not declining.

I think the next turn in the economic could be very challenging for bondholders. It seems to me that bond valuations could be challenged in a way they haven't been in a long time.

If you have money in bonds and wish to talk about it. Give me a call or send me a note. This next period of time may be a tough one for holders of bonds; particularly long-term bonds.

In last Sunday's Tribune there was an article entitled, Jobs Outlook 2011. In the article there was a chart showing job growth winners and losers.

What's interesting about this chart is that the top category for jobs gained was temporary services. In some of my previous writings I discussed the usual sequence of events that lead to improvements in the labor market. I've noted that employers will often increase their use of temporary workers before they'll begin hiring additional full time employees.

The reason you see temps being hired before an employer hires more full time employees is that they don't want to commit their company to the costs of full time employees yet. This eventually changes as employers become convinced business has come out of a recession enough to be able to handle the costs involved with additional full time workers.

I've heard in several places that the use of temporary workers is at a very high level. This should be indicative of improvements in the economy. It should also be indicative of a trend where we'll continue to see more people gaining employment.

It's been said that recessions born out of a banking crisis can be slow in recovery. It's also been said that those slow recoveries take years to play out and should be followed by expansion. This is only year two of the recovery. There should be more to come.

Finally, keep in mind that employment is the last thing to improve coming out of a recession. We are seeing some employment and should continue to see it. The use of more temps means that employers are getting closer to hiring more full time workers as they exhausted their existing employee's capacity to work. I think it's a good sign.

If you plan no investing in your 2010 IRA, you only have until April 18th to do so.

If you are investing in a profit sharing plan, Keogh, SEP, or Defined Benefit Plan, you have until you file your 2010 tax return to make your 2010 contributions, including extensions.

I think this should be a good time to add to your accounts. The markets have fully recovered from the crash of 2008 and 2009, and are positioned to move forward as the global economy recovers and expands. In my thinking, it's not a bad time to add your 2011 contributions as well.

Please don't wait until the very last minute to fund your retirement accounts; I want to make sure your investments are there on time so that they count for your 2010 returns.

I, and my clients, have a great deal of money invested with the American Funds Group. I've done so with my own money because I strongly believe in their research, management system, and long rich history of investing both here and abroad over many decades.

The American Funds Group started investing money for clients over 80 years ago in 1931 during the heart of the Great Depression. They've experienced, and prospered, through wars, a depression, recessions, stock market corrections and bear markets, political turmoil, and all the other difficulties and challenges the world has faced over the past 80 years. I have confidence and trust in their work for not only my own money, but that of all my clients.

The following link will take you to their statement and thoughts about the very recent and tragic events which are still unfolding in Japan. I encourage you to read it to help with your own perspective. If you have any questions, do not hesitate to give me a call, drop me a note, or set up a time to meet.

An Important Update on Japan

One of the most important expressions I like to use with clients over the long term is to, "Keep a solid investment perspective". The reason for this is that a well founded investment perspective should help you make better, more informed, investment decisions based in knowledge and not emotions.

Using a well formed foundation of investment and economic knowledge and the proper perspective, an investor should be able to discern when to make decisions and what kinds of decisions to make when it come to their investments and the world around them.

Often, people react to their emotions. The result of this can be selling, or buying, at the exact wrong time. Think of the people who bought real estate in late 2005 or sold their mutual funds in early March 2009 because they were overly excited or worried about the markets. They either bought or sold at a market high or low. It's not uncommon that the smart decision to make is to either stay the course in accordance with your long term plans or to do the opposite of what you are feeling. Using an informed foundation and grounded perspective, you can step back and away from your emotions. This can often lead to making better decisions.

Over the nearly 30 years I've been helping people with their financial plans and investments, I've guided my clients through many troubled times in the world. The fact of the matter is that the people who kept calm and used knowledge and a strong investment perspective were able to make good decisions while others around them flailed away or panicked. Those who held their investments were often better off than those who panicked and sold. Most things that happen in the world are transitory or short term dislocations in the markets. They come and they go and life goes on.

As we look at the world today, we're experiencing some pretty challenging issues which I would think will likely work themselves out in time. I encourage everyone to keep their balance and use a solid investment perspective. Keep in mind that both the Japanese and global economies have a history of being resilient when times are challenging. I have no reason to think we'll see anything else right now.

It's hard to believe that it's already been two years since the financial markets hit their rock bottom as they crashed due to the meltdown of the banking system and mortgage markets.

While I feel young at heart, I'm not as young as I once was. I was in the business when the financial markets crashed on October 19, 1987. They dubbed it "Black Monday." It was very surreal to watch the Dow Jones 30 Industrials drop 22% in a single day of trading. People were talking about mutual funds being dead, the economy being shot, and stocks never recovering. Looking back, we all know that we were in the middle of one of the greatest Bull markets in history. Amazingly, that was more than 23 years ago. The Dow has gone up in value from 1738.74 to 12,213.09, as of Wednesday, March 9, 2011. (This date, March 9, 2011, is the second anniversary of the most recent market bottom.) It's an increase of over 700%.

The financial markets last bottom, March 9, 2009 saw the Dow Jones 30 Industrials at 6,547.05. On the second anniversary of that bottom, it was at 12,213.09. This is an increase of 86.54% in just two years. Again, many people thought investing was dead and the markets would never recover. Clearly, the rebound in the financial markets, which has happened every time there has been a crash, is showing us something different. Markets and the economy can recover.

Today, we are in only the second year of a slow recovery. This should last for quite some time. It should be followed by an economic expansion which should add years of economic improvement. On top of this, the emerging markets are growing rapidly and should for years to come. I've recently read that the emerging markets are adding 100 million middle class citizens a year to the global economy.

I believe we are looking at some remarkable investment opportunities in the years ahead. As we clear the last vestiges of the market and banking meltdown, I think the future looks bright for many companies and investors. Try to keep your perspective while others are losing theirs, build assets when you can, and keep your eyes looking forward.

I recently read that the world is adding 100 million new middle class citizens annually. At that rate, we will roughly double the world's middle class citizens over the next ten years.

That is a staggering number of new consumers and change in a relatively short period of time. The thing is that I believe this could go on for several decades. Imagine the increase in sales and profits for companies worldwide!

In a recent piece put out by the American Funds Group, they talked about 90% of the world's GDP growth in the six years ending in 2015, being generated outside the United States.

There are many great companies located here and outside our borders. I believe this is a truly evolutionary time for the world and investors. I've been an investor both here and abroad for over 25 years and so have my clients. In my mind, the best is yet to come.

Let's face it; life has many challenges and tough moments to overcome. A few of those moments you'll never forget. Losing a beloved member of your family is among the more difficult things we all face in life.

Here's a list of things you'll want to do if you lose a family a beloved family member. I always feel it's best to prepare ahead. The preparation should help make things easier when the time arrives. The following list is not in any particular order of importance.

1. Look for a list of the professionals you'll need to contact when it's time to settle his or her affairs. Call your loved one's professionals to let them know what's happened and ask what to do. Sometimes, people will actually meet prior to their passing.

2. Hopefully your loved one kept a notebook with all their accounts listed and any other valuables as a reference for whoever is going to be responsible for their affairs once they are gone.

3. If your loved one was still working, call their work to inform them of their passing. Ask about any post life benefits they may be entitled to. This could include various insurance benefits; i.e. life, health, disability, etc. Also make sure to get any pay owed.

4. Make an inventory of their assets and liabilities.

5. File any life insurance claims on policies in your loved one's name.

6. File a claim with their local Social Security office. They may be eligible for spousal or dependent benefits. There should be a small death benefit to help assist you with burial costs.

7. Contact the county to get a number of death certificates. Many institutions will want originals. You'll probably need more than you may anticipate.

8. Begin a file of information which will be needed to prepare your loved one's current year income tax returns.

9. Check what's in the safe deposit box.

10. Have a family meeting when your loved one is alive to discuss what happens when they are gone. This is a tough thing to do for many. However, it's a very valuable time to discuss issues and be real about life.

11. Make sure the bills are all paid and kept current.

12. Take time to grieve. Many of the items on this list can be done over time.

Losing a loved one is very tough. The better you are organized, the more time you have to deal the grieving and being with family and friends. I think it's always best to discuss these matters and prepare for life's inevitabilities before someone is gone. Make everyone involved aware and part of the process.

The New Year is fully under way. Last year, 2010, is history. Let's take a look at what three of American Funds' top investment people had to say when reviewing 2010 and looking forward into 2011.

I think you'll find the four segments, totaling roughly 12 minutes, well worth your time. Getting and keeping a good perspective is always very helpful when investing.

2010 Review/2011 Outlook

As the economy recovers and the financial markets lead, it's time to take stock of the state of your financial planning and portfolio.

Many people just plain holed up from September 2008 through the end of 2010. As we begin 2011, I'm seeing more people getting comfortable with the economic and market recoveries we've been in for quite a while now.

In fact, one of today's economic reports shows consumer confidence at an 8 month high after a strong holiday season and more optimism about unemployment. This is a very positive sign since so much of the U.S. economy is consumer driven.

In the 27 years I've been in financial planning, I've noted that when times are tough, people generally don't want to talk as much, look at their portfolios, and will leave other aspects of their financial planning alone until they feel better again. Today's consumer confidence numbers and a sense I get in meetings with people so far this year is that they are indeed getting more comfortable with life again.

Believe it or not, things have been improving for nearly two years already. The financial markets bottomed March 9, 2009. The Dow has risen from a bottom of 6,547.05 to a close of 12, 229.229 yesterday. That's an increase of 86.8% in fewer than two years. (Did you buy at the bottom?) We're in the second year of economic recovery. Remember, recoveries generally last for several years and are usually followed by expansion. While there are clearly no guarantees in life or investing, I am optimistic looking forward.

Now that you feel better, it's time to start looking at your financial planning again. Here's a list of things to work on this year:

1. Do you have too much cash in the bank earning literally nothing? Should we talk about getting it working harder for you?
2. When was the last time you reviewed your estate plan?
3. Housing prices are down, when is the last time you reviewed your homeowner's policy? Are you over-insured?
4. Are you on track for retirement or in retirement?
5. If appropriate, have you looked into long term care insurance?
6. Have you looked at your 2011 tax planning?
7. Have you reviewed your life, health, disability, and auto policies recently?
8. Do you have or need an umbrella liability policy? Is your current policy too much as assets, particularly real estate, are down?
9. Have we met to review your financial goals and plans lately? Some people haven't been in since before the Crash of 2008. If that's you, it's time to meet.
10. Have we reviewed your portfolio?

There are many reasons to take time to get back in touch with your financial planning and portfolio on a regular basis, i.e., annually. If you haven't done so in quite some time, let's meet.

Two years ago the world's financial markets, banking system, and economies were in turmoil. Between the credit crisis and stock valuations fluctuating wildly, there were many questions as to what the future held. As is typical in times of uncertainty, many important decisions were placed on hold.

One of the first things that people tend to do is cinch up the belt by eliminating unnecessary expenditures; some however, are not expenditures that should be ignored for too long.

One great example of an expense that's necessary for many is insurance. Unlike an investment that is viewed with the potential for growth, insurance often appears as an expense with little return and gets pushed to the side.

The truth is, if you need life, health or long-term care insurance, it is not something to leave for another day. Going without coverage can put you and your family in a dangerous situation. You risk the possibility of become financially bankrupt without proper insurance. (In many cases, premiums only increase the longer you wait.)

If you've put off reviewing your insurance needs and coverage, now is the time to act. The financial markets and economies of the world are in recovery. Many investors and consumers are feeling more comfortable about life and money again. If you have any questions about your coverage, please give David or myself a call.

It's not often that the actual workings of Social Security or strategies for how to use it are of interest. The link I'm including in this week's Tip is interesting and gives you a few ideas about how to work with Social Security and how the laws have changed.

I might add that like everything else called a government program, nothing is simple. In fact, it's interesting to note that with Social Security, even figuring out how you determine your benefit is complex.

How to Hike Your Social Security Benefits

Happy reading!

Are you investing in bonds because you don't know what else to do with your money?

The interest rates people are getting on their bank accounts is next to nothing and may be low for some time to come. As a result of this and the crash of the stock markets two years ago, people are taking more risk than they may know so they can receive more earnings or income on their money.

The problems that can arise from investing in long term bonds at this time are:

• Emergency money you have in longer term bonds can fluctuate. The fluctuation can potentially leave you with less money than you thought if rates rise when you need to use the money.
• The growth you may need from your money is not inherent to owning bonds. They do not intrinsically appreciate. They primarily move up and down in value based on interest rate cycles.
• As interest rates rise, the value of bonds generally declines as they lose competitiveness with other higher paying bonds or people leave bonds to enjoy the benefits of owning stocks instead.

Interest rates are at or near historic lows. The only direction they are likely to go is up. That means that people who own bonds may see the value of their holdings decline as rates rise. If it were me, I would not be buying bonds in any meaningful way at this time. It seems to me it's only a matter of when, not if, interest rates rise. As a result, long term bonds positions could very well begin to lose their value.

It seems to me that this is a time to take advance of mutual funds with high quality dividend paying common stocks; otherwise known as blue chip stocks. These companies are experiencing some of the highest profit margins in history and as the economy improves both here and abroad; we should see their sales increase too. Both of these things should be beneficial to their profits and share prices.

Just today, General Electric (GE) announced 52% higher profits in the fourth quarter. GE is often seen as a bell weather stock for the economy as a whole because of their broadly diversified base of businesses.

Today, you can find many blue chip stock mutual funds with dividends that are paying more than what you are earning in the bank and are competitive with many bonds for income. As the economy and their sales improve, I look to their share prices for growth. Why stay with bonds or bank accounts with long term money when we have other options in a recovering global economy when you can look to owning solid companies whose income is competitive and value should rise in the years ahead?

Finally, if you are using long term bonds because they are paying a higher dividend than what you are earning in the bank for your emergency money, I believe this is the wrong place for that money at any time -now or in the future. The fluctuation is not worth the risk of having less in your account than you may need in a time of a true emergency.

Last week we examined eleven issues in the economy and financial markets which may happen this year. Let's continue our look at what may happen in 2011.

12. In many cases, employers are fully utilizing their current employees. The use of temporary employees is the next step in the employment process. In the past year, the use of temporary employees is up as much as six fold. This should bode well for continuing employment improvement.

13. We may see improved housing markets in some parts of the country as spring rolls around. This could be motivated by the improving employment picture and economy, low mortgage rates, low prices, and pent up demand.

14. On new construction, we may see a little light at the end of the tunnel. The number of new homes built in 2010 was near historic levels. There will come a time when the construction picture begins to turn the corner. We may see the beginnings of this in 2011.

15. Individuals are paying down debt in a way we haven't seen in many years. As they eliminate debt, we may see more consumers spending their money while bolstering the economy.

16. Consumer confidence may rise this year as more people are employed, the economy continues to progress, and their own situations improve.

17. People with money in very low yielding bank accounts and money market funds may begin to move some of their cash into higher risk investments such as mutual funds. Many dividend paying common stock mutual funds are paying higher dividends than the bank or money funds. In addition to dividends they also have the potential to grow .

18. Governments all over the country begin to address the deficits they face. With an improving economy and budget cuts, we may begin to see the size of these deficits decline.

19. We are in the second year of the economic recovery. Historically, recoveries last many years. It's pretty common that they last between seven to ten years. Since this is only the second year, I would look for more improvements over the course of 2011 and beyond. I would also spend less time worrying about the recovery ending since it's just in its beginning stages.

20. It would not be surprising to see good results from the financial markets during the recovery and potential economic expansion which may follow.

21. China is now the world's second largest economy. The Chinese have actually raised interest rates as their economy is doing well. I wouldn't be surprised to see the Chinese economy, and that of India, continue to hum along.

22. I look for global investing to continue to be a stable in people's portfolios. This is no longer a one horse carriage. There are many great companies all over the world which should grow in the years ahead.

23. A weaker dollar should help sell goods overseas and bolster foreign investments as well.

Clearly, I don't know exactly how 2011 will play out. I believe we're in the early stages of recovery here and abroad. I believe there will be years of better times ahead. I think it's an exciting time to be an investor. I do not have a crystal ball nor do I know for sure what will happen. Keep in mind the above ideas are my thoughts about the US and global economies, and the financial markets as I look into this year. Hopefully, we'll see another year of improvements in the economy and growth in the financial markets as we saw in 2010.

2011 looks to be an interesting year. As we move into the New Year, keep an eye out for indications of what to expect as the year and a new decade progress.

1. Despite large US government deficits, the economy should continue to make progress in its recovery from the Great Recession.

2. The continued recovery in our economy will be led by many corporations who have been restructuring their balance sheets and cutting costs.

3. Corporations should continue to see higher profits as a result of cost cutting and better sales, both here and abroad.

4. There's $5 trillion to $6 trillion in cash being held by US corporations, investment firms, and individuals on the sidelines waiting to get to work. Normally this figure is 20% to 33% of this number. That's a huge amount of money that may find its way into the economy, real estate, or the financial markets. As it does, it should have a meaningful impact.

5. Historically, when there has been a large decline in the financial markets, there has been a five year cycle of above average returns that followed. We're about to begin year three in March.

6. Interest rates should stay historically low; though there will be pressure to increase them.

7. Unemployment should continue to be high. It should continue to show some improvement as the year moves forward. As many economists believe, it may take years for the economy to reach full employment again. The path may be one of a slow steady improvement.

8. Historically, the third year of a presidential cycle has been good for the financial markets.

9. Money may begin to move out of bonds and into higher risk holdings as people become more comfortable with the idea of taking additional risk and the realization of higher inflation at some point takes hold. Higher inflation and higher interest rates are generally not good for bonds. This should be positive for equities.

10. The reduction in the tax workers pay to Social Security should help the economy's growth in a noticeable way.

11. Gold begins to lose some of its luster as people move into other risk asset classes. (Ultimately, I believe gold should be judged based on its value as a real commodity. In other words, its value should be based the demand for the metal, not as a place to park money when people are afraid to put it anywhere else.)

We'll continue to look at 2011 next week. I invite any questions or thoughts you may have in the meantime. These are my thoughts about this year. As always, it'll be interesting to see how it all pans out.

Happy New Year to all!